PRINTABLE VERSION   EMAIL TO A FRIEND   RSS FEEDS 18:45 GMT, Friday, 19th May 2017, by Mike Verdin
PM markets: relief at real's revival spurs ag price recovery

The Brazilian real, the friend of agricultural commodity bears in the last session, swapped sides on this one.

The currency reversed some, although not all, of its losses of the last session - when its slump on news of bribery allegations against President Michel Temer whacked prices of the likes of sugar, coffee and soybeans, in which Brazil is a big player.

Then, Brazilian farmers, who have been hoarding soybeans in the hope of higher values, flooded into the market, selling as much as 5m tonnes of the oilseed on the day, according to some market estimates.

(A weaker real boosts the value, in local terms, of assets traded internationally in dollars.)

"The Argentine peso was also weaker, and that sparked about 500,000 tonnes of cash sales," said Darrell Holaday at Country Futures.

'Active Chinese pricing'

But with the real bouncing by 3.2% against the dollar, that trend reversed,

Indeed, the dollar dropped 0.7% against a basket of currencies, boosting the affordability of dollar-denominated assets such as many ag commodities.

While there was talk of pricing, it was that by buyers exploiting the drop in values.

Richard Feltes at RJ O'Brien flagged talk of "active Chinese pricing of soybeans and US soymeal user pricing".


And with the real, acting as a barometer of Brazilian political turmoil, recovering, there was a more risk-on mood abroad in markets anyway.

Share markets gained, prices of safe havens such as US bonds fell, while the CRB commodities index renwed forward movement, adding 1.3% to hit a one-month high, helped by a 1.8% gain to $53.43 a barrel in Brent crude values.

Besides, buyers in many agricultural commodities had extra reasons to buy, with coffee values, for instance, helped by a Rabobank upgrade to its estimate for the world coffee production deficit in 2017-18.

New York-traded arabica beans for July settled 1.9% higher at 132.10 cents a pound.

'Showers should build'

Raw sugar futures got an extra boost from forecasts of further rain for cane-growing areas, including the key state of Sao Paulo, which received showers on Thursday too.

"Showers should build across southern and western Mato Grosso, southern Goias, southern Minas Gerais, Mato Grosso do Sul, Sao Paulo, Parana, Santa Catarina, and Rio Grande do Sul through Tuesday," said MDA.

With rains having already got the 2017-18 cane crushing season off to a sluggish start, raw sugar futures for July jumped 2.2% to end at 16.38 cents a pound, closing back above their 40-day moving average for the first time in nearly three months.

'Positive for prices'

Meanwhile, in grain markets, the prospect of rains for the US offered an extra prop to values, raising concerns over the spread of disease in winter wheat crops, which are being harvested in some southern areas, and of slow spring seedings of the likes of corn.

Below-average temperatures, meanwhile, are also seen as a potential setback to wheat quality, besides spring crop germination.

"The cool temperatures that are expected to last through the next couple of weeks, perhaps longer, through much of the Corn Belt has the trade a little on edge," said Benson Quinn Commodities.

"Weather leans positive [for prices], with five-day Midwest precipitation coverage of 80%, followed by two weeks of cool temperatures," said Richard Feltes at RJ O'Brien.

While some areas "will welcome rains to spur germination, saturated areas in portions of Illinois, Indiana, Missouri, Kansas and the northern Delta are faced with additional delays".

'Likely sub-par ratings'

Mr Feltes added that given the conditions, initial US corn and soybean crop ratings form the US Department of Agriculture are "likely sub-par".

And the "tail end of US soybean planting could be drawn-out affair".

Corn futures for July ended up 1.8% at $3.72 a bushel in Chicago, more than reversing losses of the last session.

Soybeans, which tumbled more than 3% last time, could not retrieve all that surrendered ground, but still bounced 0.9% to settle at $9.53 a bushel.

'Crop concerns are rising'

Still, it was wheat which fared best, adding 2.2% to $4.35 a bushel in Chicago for July, nearly back at their 40-day moving, average.

"Winter wheat crop concerns are rising after the recent wet weather and now colder than normal temperatures may harm the crop," CHS Hedging said.

Benson Quinn Commodities said that for wheat "too much moisture may be causing problems to yield and/or quality", if adding that "it is very hard to quantify it now".

Official weekly ratings on the French crop, the biggest for a European Union country, showed an easing of 1 point to 76% in the proportion rated "good" or "excellent".

But with the euro strengthening, Paris wheat futures found headway difficult, closing unchanged at E165.75 a tonne for September delivery.

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